Cottonwood Communities Inc.

11/13/2026 | Press release | Distributed by Public on 11/13/2026 16:08

Quarterly Report for Quarter Ending SEPTEMBER 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
References herein to "Company," "we," "us," and "our" refer to Cottonwood Communities, Inc. together with its
subsidiaries. The following discussion of our financial condition and results of operations should be read in conjunction with
our condensed consolidated financial statements and the related notes.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act of 1934, as amended (the
"Exchange Act"). Forward-looking statements include statements about our business, including, in particular, statements about
our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking
terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue," or other similar words.
You should not rely on these forward-looking statements because the matters they describe are subject to known and unknown
risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our actual results, performance and
achievements may be materially different from those expressed or implied by these forward-looking statements.
The following is a summary of the principal risks that could adversely affect our business, financial condition, results
of operations and cash flows and an investment in our common stock.
•We depend on our advisor to identify suitable investments and to manage our investments. There is no assurance that
we will be able to successfully achieve our investment objectives.
•There is no public trading market for shares of our common stock and the repurchase of shares by us will likely be the
only way to dispose of your shares. Our share repurchase program provides stockholders with the opportunity to
request that we repurchase their shares on a monthly basis, but we are not obligated to repurchase any shares and may
choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any
particular month in our discretion. In addition, repurchases are subject to available liquidity and other significant
restrictions. Further, our board of directors may modify or suspend our share repurchase program if in its reasonable
judgment it deems such action to be in our best interest and the best interest of our stockholders, such as when a
repurchase request would place an undue burden on our liquidity, adversely affect our operations or risk having an
adverse impact on the company that would outweigh the benefit of the repurchase.
•The offering price and repurchase price for shares of our common stock are generally based on our prior month's net
asset value ("NAV") plus, in the case of our offering price, applicable upfront selling commissions and dealer manager
fees, and are not based on any public trading market. In addition to being up to a month old when share purchases and
repurchases take place, our NAV does not currently represent our enterprise value and may not accurately reflect the
actual prices at which our assets could be liquidated on any given day, the value a third party would pay for all or
substantially all of our shares, or the price that our shares would trade at on a national stock exchange. Furthermore,
our board of directors may amend our NAV procedures from time to time. Although our properties are independently
appraised , the appraisal of properties is inherently subjective and our NAV may not accurately reflect the actual price
at which our properties could be liquidated on any given day.
•Investing in multifamily real estate assets involves certain risks, including, but not limited to: changes in values caused
by global, national, regional or local economic performance, the performance of the real estate sector, unemployment
and stock market volatility, demographic or capital market conditions; increases in interest rates and lack of
availability of financing; vacancies, fluctuations in the average occupancy and rental rates for our residential
properties; residents experiencing financial hardships (resulting in an inability to pay rent); and changes in laws and
regulations, including rent control or stabilization, tenant protection and property tax measures. Disruptions in the
financial markets and economic uncertainty, including as a result of geopolitical conflicts, such as the ongoing conflict
involving Iran and related disruptions to global energy markets, and uncertainties regarding actual and potential shifts
in U.S. and foreign policies on trade and other fiscal, monetary and regulatory policies, including with respect to
treaties and tariffs, could adversely affect our operations.
•We have paid distributions from offering proceeds and may continue to fund distributions with offering proceeds. We
have not established a limit on the amount of proceeds from our offering that we may use to fund distributions. To the
extent we fund distributions from sources other than our cash flow from operations, we will have fewer funds available
for investment in multifamily apartment communities and multifamily real estate-related assets and the overall return
to our stockholders may be reduced. Distributions may also be paid from other sources such as borrowings, advances
or the deferral of fees and expense reimbursements. These distributions may constitute a return of capital.
•All of our officers and certain of our directors are also officers of our sponsor, advisor and their affiliates and, as a
result, are subject to conflicts of interest, including conflicts arising from time constraints and the fact that the fees our
advisor receives for services rendered to us are based on our NAV, which our advisor is responsible for determining.
•We pay certain fees and expenses to our advisor and its affiliates. These fees were not negotiated at arm's length and
therefore may be higher than fees payable to unaffiliated third parties.
•Development projects in which we invest will be subject to potential development and construction delays as well as
the impact of any rising costs associated with increased inflation, or the persistence of elevated rates of inflation, as
well as changes to tariffs and trade policies, all of which could result in unanticipated increased costs and risks and
may hinder our operating results and ability to make distributions.
•We may incur significant debt in certain circumstances, including through the issuance of preferred equity that is
accounted for as debt. Our use of leverage increases the risk of an investment in us. Loans we obtain may be
collateralized by some or all of our investments, which will put those investments at risk of forfeiture if we are unable
to pay our debts. Principal and interest payments on these loans and dividend payments on our preferred shares reduce
the amount of money that would otherwise be available for other purposes.
•Volatility in the debt markets could affect our ability to obtain financing for investments or other activities related to
real estate assets and the diversification or value of our portfolio, potentially reducing cash available for distribution to
our stockholders or our ability to make investments. In addition, volatility in the debt markets could negatively impact
our loans with variable interest rates.
•There are limits on the ownership and transferability of our shares.
•If we fail to continue to qualify as a real estate investment trust ("REIT"), it would adversely affect our operations and
our ability to make distributions to our stockholders because we would be subject to United States federal income tax
at regular corporate rates with no ability to deduct distributions made to our stockholders.
Additional risks related to our business are discussed herein and in our prior period Quarterly Reports under Part II -
"Item 1A. Risk Factors" and under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2025. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this
information should not be regarded as a representation by us or any other person that our objectives and plans, which we
consider to be reasonable, will be achieved. Except as otherwise required by federal securities laws, we do not undertake to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
Cottonwood Communities, Inc. invests in a diverse portfolio of multifamily apartment communities and multifamily
real estate-related assets throughout the United States. We are externally managed by our advisor, CC Advisors III, LLC ("CC
Advisors III"), a wholly owned subsidiary of our sponsor, Cottonwood Communities Advisors, LLC ("CCA"). We were
incorporated in Maryland in 2016. We hold our assets through Cottonwood Residential O.P., LP ("CROP"), our operating
partnership. We are the sole member of the sole general partner of CROP and own general partner interests in CROP alongside
third-party limited partners.
We are a non-listed perpetual-life, NAV REIT. We qualified as a REIT for U.S. federal income tax purposes beginning
with the taxable year ended December 31, 2019. We generally will not be subject to U.S. federal income taxes on our taxable
income to the extent we annually distribute all of our net taxable income to stockholders and maintain our qualification as a
REIT.
As of September 30, 2026, we have raised $412.1 million from the sale of common stock in our public offerings and
$463.7 million from the sale of our preferred stock in periodic private offerings to accredited investors (the "Private
Offerings"). We have contributed our net proceeds from our offerings to CROP in exchange for a corresponding number of
mirrored partnership units in CROP ("CROP Units"). In addition, the DST Program has raised $42.0 million from the sale of
beneficial interests in Delaware statutory trusts.
As of our September 30, 2026 NAV, we had a portfolio of $2.8 billion in total assets, with 80.1% of our equity value
in operating properties, 2.9% in development or lease up, 14.1% in real estate-related structured investments and 2.9% in land
held for development. Refer to the sections entitled "Our Investments" and "Net Asset Value" below for further description of
our portfolio and NAV.
Proposed Merger with Mandel
On September 2, 2026, we, CROP and wholly owned subsidiaries of CROP entered into a series of merger agreements
(each, a "Merger Agreement," and each merger contemplated thereby, a "Merger") with entities controlled and managed,
directly or indirectly, by Barry R. Mandel ("Mandel") and his affiliates (each, an "Owner Entity"). The Mergers are designed to
result in our indirect ownership of all of the interests in a portfolio of multifamily apartment communities currently owned by
the Owner Entities (the "Mandel Portfolio"). Concurrently, CROP entered into a membership interest purchase agreement with
an entity affiliated with Mandel to acquire Mandel Property Services, LLC ("MPSI"), the property management company for
the portfolio. On July 30, 2026, we acquired Park Lafayette Towers from an entity controlled by Mandel in a separate
transaction.
The Mandel Portfolio comprises multifamily projects located primarily in the greater Milwaukee, Wisconsin
metropolitan area, controlled and managed, directly and indirectly, by Mandel. The Mandel Portfolio comprises 2,259 units
with an average age of 2013, average rent of $1,926, and average occupancy of 96.4%. MPSI is the property management
platform for the Mandel portfolio and provides management services for the Mandel Portfolio and certain third-party-owned
properties. If the closing conditions are met or waived, we will have a gross asset value of $3.3 billion in assets (determined in
accordance with the valuation guidelines adopted by our board of directors), including 13,400 apartments in 16 states and 21
markets. In addition, we will also acquire third-party property management contracts on 11 additional properties totaling 2,346
units.
At the effective time of each Merger, each member's membership interests in the applicable Owner Entity will be
converted into the right to receive CROP Units, cash, or a combination thereof, as elected by each member, with the cash
portion generally limited to 50% (the "Merger Consideration"). The aggregate Merger Consideration for each Owner Entity
equals the base purchase price specified in the applicable Merger Agreement plus the Owner Entity's net closing date assets, as
adjusted for customary closing prorations and reduced by mortgage debt repaid or assumed at closing. A portion of the Merger
Consideration will be held back for one year to secure post-closing adjustments for final net closing date assets and
indemnification claims. The aggregate purchase price for the portfolio of communities and MPSI is $519.9 million.
Each Merger is subject to a number of closing conditions, including approval by the members of the applicable Owner
Entity, lender approvals where applicable, the closing of Mergers representing a minimum threshold of the portfolio and the
closing of the MPSI acquisition. No assurances can be provided that we will successfully complete each Merger.
Highlights
The following highlights are for the three and nine months ended September 30, 2026, with comparisons to the same
respective periods when noted. Transaction and financing activity is presented for the nine months ended September 30, 2026.
Reportable NOI, Adjusted Same Store Reportable NOI, FFO, and Core FFO are non-U.S. generally accepted accounting
principles ("GAAP") financial measures; see the respective sections below for definitions and reconciliations to the most
directly comparable GAAP measures. Refer to the detailed explanations for changes in operating results in the respective
sections below.
Operating Results - Three Months Ended September 30, 2026
•Net loss attributable to common stockholders was $0.41 per diluted share compared to net loss attributable to
common stockholders of $0.30 per diluted share in the prior-year period primarily due to increased depreciation
and amortization expense from properties acquired in the merger with RealSource Properties, Inc. and RealSource
Properties OP, LP (the "RealSource Merger"). The in-place lease intangibles acquired in the RealSource Merger
are now fully amortized.
•Reportable net operating income ("Reportable NOI") was $31.6 million compared to $24.4 million in the prior-
year period. See Reportable Net Operating Income for more details.
•Adjusted same store reportable net operating income ("Adjusted Same Store Reportable NOI") was $19.4 million
compared to $20.0 million in the prior-year period.
•Funds from operations attributable to common stockholders and unit holders ("FFO") was $(0.01) per diluted
share/unit compared to $0.01 in the prior-year period. See Funds from Operations for more details.
•Core FFO was $0.02 per diluted share/unit compared to $0.04 in the prior-year period. See Funds from Operations
for more details.
Operating Results - Nine Months Ended September 30, 2026
•Net loss attributable to common stockholders was $0.94 per diluted share compared to net income attributable to
common stockholders of $0.00 per diluted share in the prior-year period primarily due to fewer gains on sales of
real estate ($20.5 million in 2026 compared to $64.8 million in 2025) and increased depreciation and amortization
expense from properties acquired in the RealSource Merger ($69.6 million in 2026 compared to $42.3 million in
2025).
•Reportable NOI was $92.9 million compared to $78.8 million in the prior-year period. See Reportable Net
Operating Income for more details.
•Adjusted Same Store Reportable NOI was $59.3 million compared to $60.6 million in the prior-year period.
•FFO was $0.00 per diluted share/unit compared to $(0.13) in the prior-year period. See Funds from Operations for
more details.
•Core FFO was $0.12 per diluted share/unit compared to $0.15 in the prior-year period. See Funds from Operations
for more details.
Net Asset Value
•Net asset value was $11.3303 per share/unit at September 30, 2026, compared to $11.3127 at June 30, 2026 and
$11.3574 at December 31, 2025.
Transaction Activity - Nine Months Ended September 30, 2026
•Completed the sale of a 99.9% interest in Cottonwood Apartments for gross proceeds of $57.7 million. Net
proceeds of $20.8 million were used in a Section 1031 exchange for the purchase of Park Lafayette Towers. We
recognized a gain of $15.8 million on the sale.
•Acquired Orchards at Cherry Creek, a 240-unit apartment community in Centennial, CO, for $62.4 million, of
which $43.6 million was paid with the issuance of CROP Units.
•Acquired 5 Row Apartments, a 128-unit apartment community in Charlottesville, VA, for $40.9 million, of which
$11.4 million was paid with the issuance of CROP Units.
•Acquired Park Lafayette Towers, a 271-unit multifamily community in Milwaukee, WI for $94.1 million.
•Sold a 49.8% tenant-in-common interest in Melrose Phase II for gross proceeds of $20.9 million ($4.6 million net
of assumed mortgage debt and closing costs), with net proceeds used in a Section 1031 exchange for Park
Lafayette Towers.
•Sold two land parcels for gross proceeds of approximately $10.0 million.
Financing and Capital Raise Activity - Nine Months Ended September 30, 2026
•Raised $6.4 million from the issuance of 2025 7.25% Notes.
•Raised $23.6 million of net proceeds from the sale of Series 2025 Preferred Stock.
•Raised $44.3 million of net proceeds from the sale of Series A Convertible Preferred Stock.
•Raised $18.4 million of net proceeds from the sale of our common stock issued under our registered public
offering.
•Repurchased $40.4 million of common stock and CROP Units.
Our Investments
Information regarding our investments as of September 30, 2026 is as follows:
Operating Properties ($ in thousands, except net effective rent)
Property Name
Market
Number
of Units
Average
Unit Size
(Sq Ft)
Purchase Date
Purchase
Price
Mortgage
Debt
Outstanding (1)
Net
Effective
Rent
Physical
Occupancy
Rate
Percentage
Owned by
CROP
5 Row Apartments
Charlottesville, VA
1,048
June 2026
$40,850
$27,100
$2,022
76.98%
100.00%
805 Riverfront (2)(3)
West Sacramento, CA
Sept 2023
104,646
(4)
42,556
2,175
92.98%
43.11%
Alpha Mill
Charlotte, NC
May 2021
69,500
22,700
1,550
96.25%
100.00%
Alkire Glen
Columbus, OH
December 2025
41,100
19,506
1,249
92.80%
93.47%
Antero
Colorado Springs, CO
December 2025
76,300
40,445
1,233
81.46%
94.70%
Autumn Ridge
Raleigh, NC
December 2025
61,550
36,127
1,139
92.99%
95.36%
Cason Estates
Murfreesboro, TN
1,078
May 2021
51,400
37,462
1,500
92.75%
100.00%
Cottonwood Bayview
St. Petersburg, FL
May 2021
95,900
71,417
2,510
97.73%
71.00%
Cottonwood Clermont
Clermont, FL
1,111
Sept 2022
85,000
33,637
2,010
92.17%
100.00%
Cottonwood Highland (2)(5)
Salt Lake City, UT
May 2021
65,210
(4)
46,862
1,707
94.80%
41.98%
Cottonwood Lighthouse Point
Pompano Beach, FL
June 2022
95,500
47,964
2,217
94.24%
100.00%
Cottonwood Reserve
Charlotte, NC
1,021
May 2021
77,500
48,049
1,431
93.47%
91.14%
Cottonwood Ridgeview
Plano, TX
1,156
May 2021
72,930
65,300
1,744
93.79%
100.00%
Cottonwood Westside
Atlanta, GA
May 2021
47,900
26,986
1,551
94.42%
100.00%
Enclave on Golden Triangle
Keller, TX
1,048
May 2021
51,600
48,400
1,658
91.58%
98.93%
Fox Point
Salt Lake City, UT
May 2021
79,400
43,781
1,381
92.46%
52.75%
Heights at Meridian
Durham, NC
May 2021
79,900
53,401
1,556
95.87%
100.00%
Lake St. James
Conyers, GA
1,005
December 2025
58,850
48,724
1,366
85.30%
100.00%
Melrose (2)
Nashville, TN
May 2021
67,400
56,600
1,697
96.82%
100.00%
Melrose Phase II (2)
Nashville, TN
May 2021
40,350
32,400
1,522
93.53%
50.20%
Morgan Ridge
Winston-Salem, NC
December 2025
67,800
33,276
1,195
92.34%
96.05%
Orchards at Cherry Creek
Centennial, CO
June 2026
62,400
25,000
1,594
90.00%
100.00%
Park at Midtown
Greensboro, NC
December 2025
31,900
15,979
1,223
89.30%
93.04%
Park at Oakridge
Greensboro, NC
1,035
December 2025
34,250
18,367
1,241
91.74%
93.04%
Park Avenue
Salt Lake City, UT
May 2021
67,525
(4)
43,453
1,834
89.74%
100.00%
Park Lafayette Towers
Milwaukee, WI
1,170
July 2026
94,109
60,270
2,472
96.00%
100.00%
Pavilions
Albuquerque, NM
1,162
May 2021
61,100
58,500
1,942
95.00%
96.35%
Raveneaux
Houston, TX
1,065
May 2021
57,500
47,400
1,444
91.88%
96.97%
Regatta
Houston, TX
May 2021
48,100
34,772
1,111
91.62%
100.00%
Retreat at Peachtree City
Peachtree City, GA
May 2021
72,500
58,412
1,787
95.19%
100.00%
Scott Mountain
Portland, OR
May 2021
70,700
47,678
1,812
85.11%
95.80%
Steepleway Downs
Houston, TX
December 2025
14,904
12,829
90.09%
100.00%
Stonebriar of Frisco
Frisco, TX
May 2021
59,200
53,600
1,465
89.54%
84.19%
Summer Park
Buford, GA
1,064
May 2021
75,500
52,398
1,488
93.58%
98.68%
The Marq Highland Park (2)
Tampa, FL
May 2021
65,700
46,802
2,085
95.40%
74.10%
The Retreat at Stillmeadow
Cincinnati, OH
1,002
December 2025
30,500
18,937
1,316
89.72%
85.00%
The Mill at Georgetown
Georgetown, KY
December 2025
51,250
32,658
1,553
92.54%
96.02%
Timber Hollow
Fairfield, OH
December 2025
59,730
37,257
1,340
92.66%
84.96%
Toscana at Valley Ridge
Lewisville, TX
May 2021
47,700
32,571
1,221
96.88%
58.60%
Total / Weighted-Average
11,412
$2,435,154
$1,579,576
$1,558
91.96%
89.82%
(1) Mortgage debt outstanding is shown as if CROP owned 100% of the property.
(2) Data from commercial retail units are excluded from number of units and physical occupancy.
(3) Beneficial interests in 805 Riverfront are currently being offered for purchase under our DST Program. Our ownership in the property will decrease as these
interests are sold.
(4) These purchase price amounts represent the acquisition date fair value plus subsequent capitalized costs on the projects placed in service.
(5) CROP's percentage ownership is not proportionate to the total amount CROP invested in the project due to a disproportionate ownership percentage
assigned to CROP and related parties as fees and commissions were waived for the sponsor and its affiliates. On December 31, 2025, CROP's ownership
percentage increased from 36.93% to 41.98%.
Development/Lease-Up Properties ($ in thousands)
Property Name
Market
Number
of Units
Average
Unit Size
(Sq Ft)
Purchase Date
Total
Project
Investment
Debt
Outstanding (1)
Physical
Occupancy
Rate (2)
Percentage
Owned by
CROP
The Westerly
Millcreek, UT
May 2021
$50,413
$32,018
20.20%
82.45%
Cottonwood on 6th (3)
Salt Lake City, UT
January 2026
-
-
-%
-%
(1) Debt outstanding is shown as if CROP owned 100% of the development property.
(2) On July 15, 2026, construction on The Westerly was completed. Cottonwood on 6th is estimated to be completed in 2028.
(3) Cottonwood on 6th is a development project in which we are the manager of the owning entity and have rights to a promoted interest.
Structured Investments ($ in thousands)
Property Name
Market
Investment
Type
Fixed
Interest Rate
Date of Initial
Investment
Maturity
Date (1)
Number
of Units
Funding
Commitment
Amount
Funded to Date
417 Callowhill
Philadelphia,
PA
Preferred
Equity
n/a
November 2022
n/a
$33,413
$33,413
2215 Hollywood (2)
Hollywood,
FL
Mezzanine
Loan
14.5%
April 2023
April 14, 2027
10,045
10,123
Monrovia Station
Monrovia,
CA
Mezzanine
Loan
16.5%
July 2023
July 18, 2027
20,150
20,150
Infield
Kissimmee,
FL
Preferred
Equity
n/a
November 2023
n/a
14,650
14,650
Prospect on Central
Denver, CO
Mezzanine
Loan
15.0%
April 2025
May 8, 2027
5,100
5,100
The Bowline
Santa Rosa
Beach, FL
Mezzanine
Loan
14.8%
May 2025
May 20, 2029
8,418
8,418
Regenerant Venture (3)
Various
Joint Venture
n/a
August 2025
n/a
$-
12,319
Total
1,545
$91,776
$104,173
(1) Our mezzanine loans have the following extension options: Monrovia- two 12-month options, Prospect- two 12-month options and Bowline- two 12-month
options.
(2) During the nine months ended September 30, 2026, this loan was extended and incurred an extension fee of $0.1 million, which was added to the carrying
value of the note.
(3) During the nine months ended September 30, 2026, we have received distributions of $1.1 million.
Land Held for Development ($ in thousands)
Property Name
Market
Acreage
Purchase Date
Total Investment
Amount
Percentage Owned
by CROP
Block C Joint Venture (1)
Salt Lake City, UT
1.69 acres
May 2021
$9,014
82.45%
3300 Cottonwood
Salt Lake City, UT
1.76 acres
October 2021
8,090
100.0%
Galleria (2)
Salt Lake City, UT
19.17 acres
September 2022
35,992
100.0%
Westgate (3)
Colorado Springs, CO
27.5 acres
December 2025
9,125
100.0%
Total
$62,221
(1) The Block C Joint Venture includes land held for development for Millcreek North and The Archer development projects as well as cash held at the joint
venture for future investment. The Block C joint venture also includes The Westerly, which is reflected in the separate development property table above. On
May 7, 2026, we sold The Archer for $3.0 million.
(2) On May 13, 2026, we sold approximately 6.9 acres of land at Galleria for $8.0 million.
(3) Westgate is currently under contract to be sold and is expected to close during the three months ended December 31, 2026.
Results of Operations
Our results of operations for the three and nine months ended September 30, 2026 and 2025 are as follows ($ in
thousands, except share and per share data):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2026
2025
Change
2026
2025
Change
Revenues
Rental and other property revenues
$45,807
$32,487
$13,320
$132,841
$104,980
$27,861
Property management revenues
2,433
1,487
5,756
4,938
Other revenues
2,617
2,248
7,485
5,954
1,531
Total revenues
50,857
36,222
14,635
146,082
115,872
30,210
Operating expenses
Property operations expense
19,793
12,231
7,562
56,440
39,356
17,084
Property management expense
4,272
4,227
12,988
13,594
(606)
Asset management fee
3,430
3,014
9,865
9,137
Depreciation and amortization
21,098
13,096
8,002
69,595
42,282
27,313
General and administrative expenses
2,914
1,836
1,078
8,055
7,325
Impairment loss
-
-
-
-
(957)
Total operating expenses
51,507
34,404
17,103
156,943
112,651
44,292
(Loss) income from operations
(650)
1,818
(2,468)
(10,861)
3,221
(14,082)
Equity in (losses) earnings of unconsolidated real estate entities
(5,573)
1,530
(7,103)
(9,210)
4,415
(13,625)
Interest income
(78)
1,453
(518)
Interest expense
(22,264)
(16,742)
(5,522)
(61,010)
(55,101)
(5,909)
Loss on debt extinguishment
-
-
-
(198)
(1,732)
1,534
Gain on sale of real estate assets
-
20,501
64,766
(44,265)
Gain on legal settlement
-
-
-
-
(400)
Other income (expense)
(3,005)
3,452
(10,123)
10,320
(Loss) income before income taxes
(27,468)
(15,761)
(11,707)
(59,646)
7,299
(66,945)
Income tax (provision) benefit
(1,293)
1,103
(2,396)
(877)
1,523
(2,400)
Net (loss) income
(28,761)
(14,658)
(14,103)
(60,523)
8,822
(69,345)
Net loss (income) attributable to noncontrolling interests:
Limited partners
17,638
7,301
10,337
36,117
(5,014)
41,131
Partially owned entities
2,635
1,184
1,451
Net (loss) income attributable to controlling interests
(10,341)
(6,917)
(3,424)
(21,771)
4,992
(26,763)
Less: preferred stock dividends
2,631
1,979
7,589
4,996
2,593
Net loss attributable to common stockholders
$(12,972)
$(8,896)
$(4,076)
$(29,360)
$(4)
$(29,356)
Comparison of the Three Months Ended September 30, 2026 and 2025
Rental and Other Property Revenues
Rental and other property revenues increased by $13.3 million, driven by $12.0 million from multifamily apartment
communities acquired in the RealSource Merger and $3.4 million from properties acquired in 2026 (Orchards at Cherry Creek,
5 Row Apartments, and Park Lafayette Towers). This increase was offset by a $1.9 million decline attributable to property
dispositions (Parc Westborough and Sugarmont in 2025, Cottonwood Apartments in 2026, and the deconsolidation of Melrose
Phase II), as well as a small decrease across our remaining portfolio.
Property Operations Expense
Property operations expense increased by $7.6 million, primarily driven by $6.2 million from multifamily apartment
communities acquired in the RealSource Merger, $1.6 million from properties acquired in 2026 and increased utility and real
estate tax expenses across the portfolio. This increase was partially offset by a $0.9 million decline attributable to the property
dispositions and deconsolidation discussed above, as well as decreased insurance costs.
Depreciation and Amortization
Depreciation and amortization increased $8.0 million, primarily driven by $4.3 million from multifamily apartment
communities acquired in the RealSource Merger (which included amortization of acquired in-place lease intangibles), $3.2
million from properties acquired in 2026, and depreciation on capital improvements placed in service at our remaining
properties. This increase was partially offset by a $0.7 million decline attributable to the property dispositions and
deconsolidation discussed above.
Equity in (losses) earnings of unconsolidated real estate entities
Equity in (losses) earnings of unconsolidated real estate entities decreased by $7.1 million to a loss of $5.6 million,
primarily driven by a $6.4 million decrease in earnings from preferred equity investments accounted for under the
hypothetical liquidation at book value ("HLBV") method, which allocates earnings based on book equity and contractual
liquidation waterfalls, and a $0.6 million loss from our retained interest in Melrose Phase II, primarily due to amortization. As
development properties that are funded in part by preferred equity enter lease-up, book equity generally declines as interest
capitalization ceases and depreciation and amortization begin, potentially resulting in losses recognized under the HLBV
method.
Interest Expense
Interest expense increased $5.5 million primarily driven by $3.8 million from mortgages acquired in the RealSource
Merger, $1.5 million from properties acquired in 2026 and $1.3 million of additional interest from preferred stock and
unsecured notes. This increase was partially offset by a $1.0 million decline attributable to the property dispositions and
deconsolidation discussed above and $1.1 million with the payoff of preferred stock and unsecured notes.
Other Income (Expense)
Other income (expense) changed from an expense of $3.0 million during the three months ended September 30, 2025
to income of $0.5 million during the three months ended September 30, 2026, primarily driven by $2.0 million of costs
associated with the RealSource Merger.
Comparison of the Nine Months Ended September 30, 2026 and 2025
Rental and Other Property Revenues
Rental and other property revenues increased by $27.9 million, primarily driven by $36.1 million from multifamily
apartment communities acquired in the RealSource Merger and $3.6 million from properties acquired in 2026. This increase
was partially offset by a $11.6 million decline attributable to the property dispositions and deconsolidation discussed above.
Other Revenues
Other revenues increased by $1.5 million primarily driven by interest earned from additional investments in real estate-
related loans.
Property operations expense
Property operations expense increased by $17.1 million, primarily driven by $16.4 million from multifamily apartment
communities acquired in the RealSource Merger, $2.6 million from increased insurance, utility, and property tax costs across
the portfolio and $1.5 million from properties acquired in 2026. This increase was partially offset by a $3.8 million decline
attributable to the property dispositions and deconsolidation discussed above.
Depreciation and Amortization
Depreciation and amortization increased $27.3 million, primarily driven by $26.5 million from multifamily apartment
communities acquired in the RealSource Merger (which includes amortization of acquired in-place lease intangibles), $3.4
million from properties acquired in 2026, and depreciation on capital improvements placed in service at our remaining
properties. This increase was partially offset by a $4.5 million decline attributable to the property dispositions and
deconsolidation discussed above.
Equity in (losses) earnings of unconsolidated real estate entities
Equity in (losses) earnings of unconsolidated real estate entities decreased by $13.6 million to a loss of $9.2 million,
primarily driven by a $10.1 million decrease in earnings from preferred equity investments accounted for under the HLBV
method, a $3.6 million decrease from the addition of Autumn Ridge and Melrose Phase II as unconsolidated real estate entities
(which included our share of amortization of lease intangibles).
Interest Expense
Interest expense increased by $5.9 million primarily driven by $11.3 million from mortgages acquired in the
RealSource Merger, $1.6 million from properties acquired in 2026, and $4.7 million of additional interest from preferred stock
and unsecured notes. This increase was offset by a $6.0 million decline attributable to the property dispositions and
deconsolidation discussed above and $4.4 million with the payoff of preferred stock and unsecured notes.
Gain on Sale of Real Estate Assets
Gain on sale of real estate assets decreased by $44.3 million. During the nine months ended September 30, 2026, we
recognized a $15.8 million gain from the sale of Cottonwood Apartments and a $4.8 million gain from the sale of a 49.8%
tenant-in-common interest in Melrose Phase II, compared to $64.8 million of gains from the sales of Cottonwood Broadway,
Parc Westborough, and Sugarmont during the nine months ended September 30, 2025.
Other Income (Expense)
Other income (expense) changed from an expense of $10.1 million during the nine months ended September 30, 2025
to income of $0.2 million during the nine months ended September 30, 2026, primarily due to $6.1 million of selling
commissions expensed in connection with the exchange of Series 2019 Preferred Stock for Series 2025 Preferred Stock and
$2.0 million of costs associated with the RealSource Merger incurred during 2025.
Reportable Net Operating Income
Reportable net operating income ("Reportable NOI") is a supplemental non-GAAP measure of our property operating
results, defined as operating revenues less operating expenses. While we consider net income (loss), as defined by GAAP, to be
the most appropriate measure of overall performance, we also view Reportable NOI as an appropriate supplemental
performance measure as it provides investors with useful information as to the ongoing operating performance of our properties
by excluding items not considered controllable through property management, such as real estate-related depreciation and
amortization, general and administrative expenses, advisory and property management fees, interest expense, gains on sale of
real estate, other income and expense, and noncontrolling interests. Reportable NOI should not be viewed as an alternative to
net income (loss) as a measure of financial performance, as it excludes items that may materially impact our results. In addition,
our definition of Reportable NOI may differ from that used by other real estate companies. Accordingly, net income (loss)
should be considered the primary indicator of our overall financial performance.
Reportable NOI represents 100% of each of our consolidated and unconsolidated properties' reportable rental and
other property revenues and reportable property operations expense. As of September 30, 2026, our same store portfolio
consisted of 20 consolidated properties and five unconsolidated properties. Our non-same store and other portfolio consisted of
13 consolidated properties, four sold properties, and one unconsolidated property. Refer to Note 15 of the condensed
consolidated financial statements for details of Reportable NOI, including significant expenses.
Three Months Ended September 30,
Nine Months Ended September
30,
2026
2025
2026
2025
Reportable NOI
Same Store
$22,293
$23,327
$68,579
$70,128
Non-Same Store and Other
9,342
1,099
24,301
8,677
Total Reportable NOI
$31,635
$24,426
$92,880
$78,805
Reportable NOI for Same Store decreased by $1.0 million, or (4.4)%, for the three months ended September 30, 2026
and decreased by $1.5 million, or (2.2)%, for the nine months ended September 30, 2026 when compared to the prior-year
periods. Weighted-average monthly rent for the same store portfolio was $1,663 and $1,683, and weighted-average occupancy
was 93.4% and 93.2%, at September 30, 2026 and 2025, respectively.
Reportable NOI for Non-Same Store and Other increased by $8.2 million and $15.6 million for the three and nine
months ended September 30, 2026, respectively, when compared to the prior-year periods, primarily driven by contributions
from the properties acquired in the RealSource Merger and properties acquired in 2026. These increases were partially offset by
lost NOI from the sales of Parc Westborough and Sugarmont in 2025 (and, for the nine-month period, Cottonwood Broadway),
as well as the sale of Cottonwood Apartments and the deconsolidation of Melrose Phase II in the second quarter of 2026.
The following table reconciles the net loss attributable to common stockholders in the condensed consolidated
statements of operations to total Reportable NOI for the three and nine months ended September 30, 2026 and 2025 ($ in
thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2026
2025
2026
2025
Net loss attributable to common stockholders
$(12,972)
$(8,896)
$(29,360)
$(4)
Depreciation and amortization
21,098
13,096
69,595
42,282
General and administrative expenses
2,914
1,836
8,055
7,325
Impairment loss
-
-
-
Property management revenues
(2,433)
(1,487)
(5,756)
(4,938)
Property management expense
4,272
4,227
12,988
13,594
Asset management fee
3,430
3,014
9,865
9,137
Other revenues
(2,617)
(2,248)
(7,485)
(5,954)
Equity in losses (earnings) of unconsolidated real estate entities
5,573
(1,530)
9,210
(4,415)
Interest income
(560)
(638)
(935)
(1,453)
Interest expense
22,264
16,742
61,010
55,101
Loss on debt extinguishment
-
-
1,732
Gain on sale of real estate assets
(12)
-
(20,501)
(64,766)
Gain on legal settlement
-
-
-
(400)
Other income (expense)
(447)
3,005
(197)
10,123
Income tax provision (benefit)
1,293
(1,103)
(1,523)
Net (loss) income attributable to noncontrolling interests - limited
partners
(17,638)
(7,301)
(36,117)
5,014
Net loss attributable to noncontrolling interests - partially owned entities
(782)
(440)
(2,635)
(1,184)
Preferred stock dividends
2,631
1,979
7,589
4,996
Rental and other property revenues of unconsolidated properties
9,152
6,922
26,073
20,936
Property operations expense of unconsolidated properties
(3,531)
(2,752)
(9,594)
(7,755)
Reportable NOI
$31,635
$24,426
$92,880
$78,805
We further evaluate the performance of properties in our Same Store reportable segment on an adjusted, at-share basis
("Adjusted Same Store Reportable NOI"), reflecting CROP's ownership at the end of the period for all properties within the
same-store portfolio. This analysis may not be comparable to that of other real estate companies and should not be considered
more relevant or accurate than GAAP measures in evaluating our operating performance.
The following table reconciles Same Store Reportable NOI to Adjusted Same Store Reportable NOI for the three and
nine months ended September 30, 2026 and 2025 ($ in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2026
2025
2026
2025
Same Store Reportable NOI
$22,293
$23,327
$68,579
$70,128
Non-core property expenses, net
At share adjustments (1)
(3,230)
(3,332)
(9,810)
(10,246)
Adjusted Same Store Reportable NOI
$19,362
$20,038
$59,251
$60,620
(1) Adjustment to apply CROP's ownership percentage in the properties within the same store portfolio.
Funds from Operations
We believe funds from operations, or FFO, is a beneficial indicator of the performance of an equity REIT and of our
company. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment
Trusts, or NAREIT, as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of
operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost
accounting and useful-life estimates), gains and losses from change in control, impairment losses on operating real estate assets,
the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after
adjustments for our share of unconsolidated partnerships and joint ventures.
We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However,
our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT
definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost
accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes
predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors
and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to
be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations,
provides a more complete understanding of our performance relative to our competitors and provides a more informed and
appropriate basis on which to make decisions involving operating, financing, and investing activities.
We adjust FFO by the items below to arrive at Core FFO, which management uses as a measure of our operating
performance. We believe these measures are useful to investors because they facilitate an understanding of our operating
performance after adjusting for non-cash expenses and other items not indicative of ongoing operating performance. Our
calculation of Core FFO may differ from that used by other REITs and, accordingly, may not be comparable.
Beginning with our Core FFO presentation for the year ended December 31, 2025, we adjusted Core FFO for preferred
equity investments accounted for under the HLBV method to reflect contractual preferred returns when those returns exceeded
the amount recorded under the HLBV method. This occurs when the book value of a venture's equity declines after the
property is placed in service in part due to depreciation and interest expense no longer being capitalized, such that it no longer
covers the preferred returns and return of capital on a hypothetical liquidation. We discontinued that adjustment beginning with
the three and six months ended June 30, 2026. Consistent with the NAREIT definition of FFO and our treatment of other
unconsolidated real estate investments, FFO now includes an adjustment for our share of a venture's real estate depreciation and
amortization reflected in the HLBV calculation. FFO and Core FFO for prior periods will be recast and presented on a
comparable basis in filings in which they appear.
Preferred returns accumulated under the terms of the agreements exceeded the amounts included in Core FFO using
the method described above by $1.9 million and $5.6 million for the three and nine months ended September 30, 2026,
respectively, and by $1.9 million for each of the three and nine months ended September 30, 2025. We will realize accumulated
preferred returns only upon a sale, refinancing or other capital event at the respective ventures, and there is no assurance we will
realize them in full.
Neither FFO nor Core FFO is equivalent to net income or cash generated from operating activities determined in
accordance with U.S. GAAP. Furthermore, FFO and Core FFO do not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or
uncertainties. Neither FFO nor Core FFO should be considered as an alternative to net income as an indicator of our operating
performance.
The following table presents a reconciliation of FFO and Core FFO to net (loss) income attributable to CROP ($ in
thousands, except share and per share data):
Three Months Ended September 30,
Nine Months Ended September 30,
2026
2025
2026
2025
Net (loss) income attributable to controlling interests
$(10,341)
$(6,917)
$(21,771)
$4,992
Adjustments to arrive at FFO:
Real estate-related depreciation and amortization
20,486
12,560
67,343
40,506
Depreciation and amortization from unconsolidated real estate entities (1)
7,752
2,529
15,982
6,827
Gain on sale of real estate assets
(12)
-
(20,501)
(64,766)
(Loss) income allocated to noncontrolling interests - limited partners
(17,638)
(7,301)
(36,117)
5,014
Amount attributable to above from noncontrolling interests - partially
owned entities
(1,518)
(517)
(4,878)
(1,547)
Funds from operations attributable to common stockholders and unit
holders
(1,271)
(8,974)
Adjustments:
Gain on legal settlement
-
-
-
(400)
Amortization of intangible assets
2,251
1,776
Amortization of debt issuance costs
1,155
2,684
2,341
Accretion of discount on preferred stock
1,355
1,069
3,794
3,021
Selling commissions and expenses from Series 2025 Preferred Stock
Exchanges
-
-
6,066
Share-based compensation
2,007
2,652
Losses on debt extinguishment
-
-
1,732
Impairment loss
-
-
-
Losses on derivatives
(566)
(461)
1,525
Legal costs and settlements, net
-
-
-
Other adjustments (2)
(1,294)
(74)
Amount attributable to above from noncontrolling interests and
unconsolidated entities
-
Core funds from operations attributable to common stockholders and unit
holders
$2,150
$3,025
$10,953
$10,864
FFO per common share and unit - diluted
$(0.01)
$0.01
$0.00
$(0.13)
Core FFO per common share and unit - diluted
$0.02
$0.04
$0.12
$0.15
Weighted-average diluted common shares and units outstanding - FFO and
Core FFO
100,289,253
70,667,387
95,134,518
70,327,756
(1) Three and nine months ended September 30, 2025 amounts have been recast for the change in HLBV policy as mentioned above.
(2) Other adjustments include acquisition fees and expenses, insurance losses and other miscellaneous non-cash or non-recurring items.
Weighted-average dilutive common shares and units for FFO and Core FFO are as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2026
2025
2026
2025
Dilutive weighted-average Series A Convertible Preferred shares
14,570,220
8,852,926
13,165,024
7,492,882
Weighted-average common shares
31,683,315
30,072,749
31,076,766
30,873,016
Weighted-average limited partnership units
54,035,718
31,741,712
50,892,728
31,961,858
Weighted-average common shares and units outstanding
100,289,253
70,667,387
95,134,518
70,327,756
FFO was $(0.01) and $0.00 per diluted share/unit for the three and nine months ended September 30, 2026,
respectively, compared to $0.01 and $(0.13) in the prior-year periods, respectively. These changes were primarily due to
contributions from properties acquired in the RealSource Merger.
Core FFO declined to $0.02 and $0.12 per diluted share/unit for the three and nine months ended September 30, 2026,
due to losses recorded from preferred equity investments under the HLBV method and from the increase in weighted-average
diluted shares and units outstanding resulting from the RealSource Merger, 2026 acquisitions, and issuances of Series A
Convertible Preferred Stock.
Refer to "Results of Operations" and "Reportable Net Operating Income" above for further detail.
Net Asset Value
Our board of directors, including a majority of our independent directors, has adopted valuation guidelines, as
amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of
our net asset value ("NAV"). Pursuant to these valuation procedures, we computed a September 30, 2026 NAV per share for
our outstanding Class T, Class D, Class I, and Class A shares of $11.3303.
The purchase price per share for each class of common stock will vary and will generally equal our prior month's
NAV per share, as determined monthly, plus applicable upfront selling commissions and dealer manager fees. Refer to Part II.
Cottonwood Communities Inc. published this content on November 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 13, 2026 at 22:08 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]